Chapter 11 Practice Quiz #1 & #2

In the short run, ATC is NOT always higher than

MC

Which of the following must be true if the average total cost curve is declining?

Marginal cost is less than average total cost.

Assume Brad worked as a contractor for a year and had revenues of $120,000 and explicit cost of $70,000. Instead of being a contractor, he could have been paid $80,000 working for a computer company. His:

economic profit equaled -$30,000 and he would be rational to stop working as a contractor.

A firm is producing 200 units of output at a total cost of $1,000. The firm's average variable cost equals $4 per unit. Total fixed cost:

equals $200.

​Average variable cost:

​first tends to decrease, and then increase as output expands.

A firm which owns its own equipment and is earning positive economic profits

​is likely earning positive accounting profits.

​If Adam's Rib Joint took in $35,000 in revenue last week and had out-of-pocket expenses of $31,500:

​it is not clear whether Adam earned any economic profit last week because it depends on the magnitude of the implicit costs.

A firm's average fixed cost curve is:

​a curve that declines as output expands and approaches the X-axis when output is very large.

​If average fixed cost and average variable cost are summed together, the result is:

​average total cost.

​Exhibit 11-11 The table below shows how total cost varies with output in a factory producing watches: Refer to Exhibit 11-11. If the output equals four watches per week, then the average total cost of producing a watch equals:

$18.

Cassie produces and sells 400 jars of homemade jelly each month for $3 each. Each month, she pays $200 for jars, $150 for ingredients, and uses her own time, with an opportunity cost of $300. Her economic profits each month are:

$550

Refer to Exhibit 11-4. How much are average fixed costs (in dollars) at 4 units of output?

20

Refer to Exhibit 11-13. At what level of output (in thousands) is average total cost minimized?

4

A firm can produce 840 gallons of paint per day with 6 workers, or 910 gallons per day with 7 workers. The marginal product of the 7th worker is:

70

A firm's average fixed cost when producing 2,000 units of output equals $10. When only 1,000 units of output are produced:

AFC must equal $20.

Which of the following is consistent with the diminishing marginal product of studying?

Beyond some point, each added hour studying each day adds less to what you know than the previous hour's study.

Refer to Exhibit 11-9. The marginal cost curve is the curve labeled:

D.

If the cost of variable inputs increased, which of the following would NOT occur?

Its AFC curve would shift up.

In the short run, an expansion of output always causes in an increase in:

TC

Given the following information about the cost function for Bob's Beautiful Bowling Balls: Which of the following is false?

The total cost of producing 5 units is 36.

Diminishing marginal product of labor occurs when:

adding another unit of labor increases output, but not by as large a margin as the previous unit of labor employed.

Assume the following cost information about Fred's widget company: Its fixed cost is $27, and its total variable cost is $18 for 1 unit; $33 for 2; $45 for 3; $60 for 4; and $78 for 5. Given this information:

all of the above are true. (A. ​the marginal cost of providing the second unit is $15) (B. ​the total cost of producing 4 units is $87) (C. ​the average total cost of producing five units is $21)

Assume that you know the following cost information about Fred's widget company: Its fixed cost is $9, and its total variable cost is $6 for 1 unit; $11 for 2; $ 15 for 3; 20 for 4; and 26 for 5. Given the above information,

all of the above are true. (A. ​the marginal cost of providing the second unit is $5) (B. ​the total cost of producing 4 units is $29) (C. ​the average total cost of producing five units is $7)

Refer to Exhibit 11-10. At output level Q, total fixed cost equals:

area ADEB.

Refer to Exhibit 11-10. At output level Q, total cost equals:

area ADQ0.

Economic profits will take into account:

both implicit and explicit costs.

When there are diseconomies of scale in production:

long-run average total cost increases as output expands.

When average total cost is decreasing as output expands:

marginal cost must be less than average total cost.

​Refer to Exhibit 11-16. Point A refers to:

minimum efficient scale.

Which of the following is not an explicit cost for the owner of a local pizza parlor?

other uses for the land that the parlor sits on

When economies of scale exist:

per unit production costs decline as output expands.

Economies of scale:

pertain to the long run only.

If a firm experiences economies of scale at all levels of output:

the slope of its long-run average total cost curve is everywhere negative.

A firm is producing 1,000 units of output for which the average variable cost of production equals 50 cents. The firm's total fixed costs equal $700. The total cost of producing 1,000 units of output equals:

​$1,200.

A firm has $350 million in revenues and explicit costs of $150 million. If its owners have invested $150 million in the company at an opportunity cost of 10 percent a year, the firm's economic profit is:

​$185 million.

​If average total costs are $40 and average variable cost are $20 at 10 units of output and the marginal cost of the 11th unit is $30, what is the average total cost of 11 units?

​$39.09

An example of an implicit cost of production is:

​the opportunity cost of space in your home that is used for a home office.